VW announced cheating on emissions in hopes of striking deal, may miss March 24 deadline

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It’s been six months since Volkswagen admitted that it lied to US regulators for years about the emissions of its diesel vehicles. Today, the company testified in German court that it came clean in the hopes of limiting the cost of the scandal. It acknowledged that its vehicles were far above emission targets to US regulators on September 3, 2015, but did not publicly admit the problem until September 18. This two-week delay was meant to give the company time to reach a settlement, but VW has been sued by shareholders alleging that the company should have informed them more quickly that it faced a potential lawsuit.

Reuters reports that Volkswagen is fighting that argument by claiming that the delay was both reasonable and in the best interests of the company. A 113 page letter from the law firm Goehmann reads, in part:“The Volkswagen management board had a reason to assume that a consensual solution would be possible with the authorities, that would not have led to significant economic consequences for VW… The temporary non-disclosure did not serve the purpose of covering up the breach of compliance (of U.S. rules).”

VW’s stock is still trading well below its $167 high pre-crisis, but has recovered somewhat.

We now know that VW had hoped that the EPA would simply fine it a modest amount of money and allow it to continue operating. Previous fines for this type of infraction had been relatively low and well under $1 billion USD. Whatever rubber stamp the company expected to earn when it walked into its meetings with the EPA on September 3, it clearly didn’t get.

Volkswagen reportedly struggling to find solution

That brings us to the crux of the problem — when can US owners of affected vehicles expect a solution? Again, unfortunately, there’s not much good news here.

Reuters quotes VW brand chief Herbert Diess as saying in an interview published Saturday that it will likely take months, not weeks, to solve the problem, which affects an estimated 600,000 vehicles in the United States. VW only has a few weeks to go until it reaches the March 24 deadline set by US District Judge Charles Breyer, which mandated the company find a solution within 30 days. It’s not clear what the judge will do if VW breaches that order, but his reaction could hinge on how the EPA reacts to the news. If the government regulators VW is working with confirm that the company is operating in good faith, that’s one thing. Were they to certify that the company is dragging its heels because it doesn’t actually want to solve the problem, that’s something altogether different.

The Internet has not been shy about creating updated VW advertising.

If nothing else, the delays suggest that there are no palatable options for VW on the table. The EPA is likely pushing for an actual solution to the problem and/or comprehensive buyback at vehicle valuations that would make people want to sell them back to the company. VW, as you’d expect, would undoubtedly push to limit the cost of any proposed solution or buyback to a minimum level. Since the EPA wants the vehicles off the roads, it has every reason to push for higher valuations, while Volkswagen will want to minimize costs.

The reason I suspect the dialog is hung up on these issues is simple: The mechanics of how to remove NOx and sulfur particles from diesel vehicles hasn’t changed one iota in the past six months. By now, Volkswagen has to know how much it would cost, on average, to put a fluid-based treatment system in its vehicles, how much it would cost to implement an alternate solution (if any exists), and what its expected buyback costs would be. Corporations move slowly, but given the degree of uncertainty this has cast over the US market, there’s good reason to push for rapid resolution.

If Volkswagen is still stalling, it’s probably not hunting for magical new methods of dealing with the problem, but fighting with the EPA over the costs and difficulty of proposed solutions. If the problem drags on for months, as Diess implies, the EPA could retaliate by refusing to certify any 2017 Volkswagen vehicles for the US market. It’s in the company’s best interest to resolve this sooner, rather than later.

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It’s been interesting watching Volkswagen go down in a spectacular blaze of backtracking and finger pointing.

close

It will be interesting to see how many more manufacturer fall into this sinkhole now that it blew open. In Europe plenty of models were found to have higher than reported emissions in real life scenarios as opposed to lab tests, same in Japan.
The difference is that they didn’t use a defeat device. But that should only make a difference when sentencing is passed for the executives that decided this is the way to go. Still it’s eerily quiet so far so I’m wondering how many of the manufacturers are “greasing the whelks of the system”, promising the world to governments so they’re not outed as smoke-offenders.

jtibbs

And if VW does offer to buy back vehicles from consumers, what then are the chances that the consumers would be properly compensated? I feel there would be another lawsuit from the consumers themselves at that point.

Mark

Judge Breyer, who is hearing the consolidated lawsuits against Volkswagen, has effectively blocked any individual settlements with individual plaintiffs (consumers, dealers, etc.) One reason (among many) is just the problem you mentioned. The court will make the final (subject to appeal) determination as to settlement terms and conditions for all parties. The customer goodwill payments or credits given to existing U.S. diesel owners will likely not factor into the final settlements.

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There’s never “proper compensation”. Unless you’re grossly over-compensated as a client you will always feel cheated. A catalog value will be used to determine the given the age and mileage. People always assume their car (or any other product) is worth more than the catalog value. They used better fuel, better wax, better roads, better driving, better mechanics than everybody else so they see no reason to accept that value as compensation.

Joel Hruska

As far as I’m concerned, VW should be forced to buy back every single VW at brand-new sticker price with an additional $5000 on top for inconvenience. It lied to consumers. It sold them a false bill of goods. Rather than attempting to calculate out depreciation or assessing a penalty based on a multiple of the car’s base value, let the consumer see the benefit for once, rather than the lawyers.

If you bought a 2009 Passat that’s affected by this and you’ve put 120,000 miles on your car since then, you get back the full sticker price adjusted for inflation + $5000.

Crunchy005

I’m glad i went with the gas version of the golf and not the diesel, I would be pissed if all i got was high bluebook value for my car to be bought back(something like $4000 loss in value over less than a year). If VW doesn’t come up with a solution would the EPA put a ban on those cars and not allow people to drive them? That could cause other issues for owners until they can get a new car(after waiting for VW to buy it back).

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That’s why you probably don’t get to make the laws :). To be realistic just think about who paid for the 2008 crisis. The banks or the people?
What you’re proposing is not not how capitalism works. If the punishment is too high it only serves to kill the company and leads to even higher losses. We all go home empty handed or in debt… to someone.

And you can’t apply any punishment that isn’t already mandated by law. Any recall would have to involve the same conditions and I don’t remember GM having to buy back any of the 30 million cars with the faulty ignition switch even after they directly led to 124 deaths and even if GM execs knew about the issue for a decade before the recall. And the “fine” for them was under $1 billion. Just to get an idea, at an average of $15.000 per car that affair would have cost GM… $600.000.000.000. Let’s call it half a trillion.

But GM is an American company, VW is not. Nor does VW have any significant impact on US economy should they be run into the ground.

If such penalties would be applied not only will they be illegal under the current law of almost any country but the consumer will only win once. After this point every little bit of the costs and risks will be supported by the customer. Because as we can see almost every big manufacturer screwed up at some point and they all need cover.

Joel Hruska

“And you can’t apply any punishment that isn’t already mandated by law. ”

No, but the EPA can reach an agreement with VW in which VW “agrees” to provide such solutions and the EPA “agrees” not to sue them for the billions of dollars for which they are potentially on the hook.

“What you’re proposing is not not how capitalism works.”

What I’m proposing is how capitalism *used* to work. People went to jail for both the stock market crash of 1929 and the market crash of 1987.

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Anything is possible with closed door negotiations but my point was the precedent already set in similar cases never involved such drastic measures. Even when we are talking about knowingly allowing defects that led to repeated loss of lives.
What’s the list price for a person’s life these days?

Requesting full price of the vehicle “plus a bit on top” seems a bit over the top if you stop to think about it and there’s no *objective* justification behind it. No insurance company pays the full list price if someone destroys your car. No “inconvenience tax” if you have to show up with you car for a normal recall. So why would you consider this kind of compensations reasonable now?

Imagine it’s 2014 and we’re in the middle of the GM scandal. Would you advocate such a drastic measure as you do in this case? Would the economic impact of such a measure on *you* have any weight?

But it seems to me that the real problem is a lot bigger than just emissions. It’s that US regulators and agencies only act based on their own interests and agendas which almost never coincide with the interests of the people. And I understand your frustration but the fix won’t come from any punishment you may think of for VW.

And a bit of objectivity goes a long way.

Joel Hruska

Close,

In general, I think manufacturers should pay far more than they do for knowingly shipping defective products. I think the cost of the “fix” should drastically, significantly outweigh the value of the cheat. That’s a blanket general opinion and I would likely apply it in ways that saw the GM victims you refer to compensated far more than they were.

Reasonable minds can, of course, agree to disagree — but if I had bought a VW based on their claims to a clean diesel engine, I would feel profoundly cheated and lied to.

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The punishment and the compensation shouldn’t be “negotiated” and applied differently depending on who committed the crime. For 30 million cars that could have killed people at any time (and did) GM received as punishment a $900 million fine and recalled the affected cars. None of the drivers that could have died at any time received any compensation, only the families of the dead.

I’m bringing GM in the discussion simply because it’s a lot harder to propose or apply sanctions that will kill the company when you know your country’s economy will suffer greatly. And I asked you if you’d have proposed the exact same measures you mentioned above also to GM knowing that they will bankrupt the company and a lot of other companies small and large that revolve around it.

If the US authorities are into slaps on the wrist then it should follow the precedent. If not it means that they are using a double standard. But we both know they they just dance as the money dictates. Nothing to do with protecting you as much as protecting their interests.

Joel Hruska

Close,

If you’ve described the terms of the GM situation accurately, then I have problems with the fact that none of the families of the dead got a settlement out of the issue. A $900M fee isn’t chump change, no — but some of that money should’ve gone to those affected.

I do not know what the average price of the VWs in question would have been. If the average price was $20,000 and my own $5000 adder brings it up to $25K, that would be a $12.5 billion charge. That is, to be sure, a hell of a lot of money.

But VW AG booked sales revenue of 202.5 *billion* euros in 2014, and profits of 11.1 billion euros in the same time period. At the exchange rates of the time, that was $13.2 billion dollars.

Do I think it’s equitable and fair to fine VW roughly one year of its global profits given that it defrauded US customers for six years and would have continued to do so if not caught? Yes. Yes, I do. I’m not saying they have to pay the fine all at once — I’d be happy to extend them a six-year window in which to do so, with interest and penalties attached.

Do I think GM’s penalties should have been far larger? Yes. At least as far as the victims were concerned.

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I’ve described the GM situation as accurately as the media described it so take it with a grain of salt. But I said *only* the families of the dead got a settlement. The 30 million drivers who could have died just got a new ignition switch. Just like the airbag recall and countless others.

But here lies the conundrum. You only described the compensation which is for the buyer. There’s also the punishment part which should discourage the company from doing anything like this again and “make them pay” for what they already did. That’s some billions on top of that. The figures in the media hover around $50 billion.
How do you apply the punishment or compensation if instead of helping the people you are doing them a disservice? Maybe for VW it would seem reasonable but then you move on to a company like GM and suddenly the model no longer works. You’re helping a group of citizens while dooming all the rest (GM going bankrupt would actually be an economic disaster). If a model only works half of the time you can be sure the other half will be abused. And it is.

Most defects are known well ahead of any recall. If you take that as “willingly endangering people” and you force the companies to buy the car back + inconvenience fee then the next generation of cars will be $5k more expensive. And you will pay for it.

And there’s yet another issue which is more of an issue of principle. In VW’s case you are actually punishing the shareholders, employees, and related industry who most likely had no idea of this issue. It’s like you getting evicted because 3 doors down someone overflowed the bathtub. The people personally responsible, or the ones who didn’t implement the processes needed to avoid such situations and to make them easy to follow to the “source” if they do happen get slaps on the wrist and small fines because that’s the law.

The only way to actually punish them is to make the people taking the decision and the ones making that decision possible personally accountable for it. With all of their personal money – which is close to impossible. I know how audits and investigations like this go. The paper trail is so deep that all evidence is lost and in the end the “rogue engineer” takes the fall. Then you have to “force” the company to pay the penalties but not reduce personnel, salaries, etc. Otherwise all you did is punish the working people.

Mel Gross

Again, the GM situation was different. When that switch was first used, there was no reason to think there was a problem. Manufacturers done test them with several ounces of weight hanging from the keychain, which is why they didn’t know of the problem for some time until after it happened. And then, from the testimony, they couldn’t find why it was happening, until they found out that it was that weight that was causing the problem.

Whatever GM did from that point wasn’t communicated up to the top, and it dragged on for several reasons.

But what VW did was deliberate from the beginning. They also knew that there would be deaths as a result of the pollution. As far as I’m concerned, that’s a vastly more serious problem. Then, blaming a few rogue engineers is ridiculous. Even many in the company were shaking their heads at that. It was a major design point in the car, and cost hundreds of millions to design build and install. To think the a few engineers, by themselves, could have authorized that is nuts!

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Yes it was a different situation. VW cannot be *directly* linked to any deaths while GM was *directly* linked to 124 of them. Guess how many people wound up in jail for this ;). At some point they knew and kept their mouths shut. For 10 years.

No single source of such pollution can be considered “the killer” because no single source kills people by itself. It’s the accumulation of such sources that kills. As such you cannot accuse any one manufacturer for a death. Also NOx is the component that helps global warming, soot/particulates are the ones known for respiratory disease.

And even if VW cars were legally clean the fact that VW sells a boatload of them around the world basically means that they would be more responsible for killing people than smaller manufacturers. Should Toyota be in the same boat as the largest manufacturer in the world so the biggest contributor to pollution and deaths? And you should know that you have a small part in killing somebody. After all you’re the one for which manufacturers pollute.

“Whatever GM did from that point wasn’t communicated up to the top”
If the head doesn’t know what the legs are doing is yet more reason to chop it off. VW execs are trying to use the same excuse now. Execs didn’t know, rogue engineers. Sounds like C*Os are only responsible for getting paychecks and bonuses and not much else. “I dunno”…

The only real difference is that punishing VW as suggested (here on the board or the $60-70bln fine + additional paybacks circulated in the media) has almost no impact on US economy while punishing GM in the same way would be a huge blow. This isn’t about what’s wright, it’s about politics and money.

Mel Gross

You’re wrong in this. Deaths from VW’s actions have been estimated, It’s in the low thousands for Europe. We can estimate the number of deaths from specific forms of pollution. If you don’t understand how thats dione, thats your problem.

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Statistically speaking you are responsible for at least 1 death in your lifetime by pollution and destruction of the ecosystem done directly and deliberately by you: a camp fire, driving your car, taking a bus, smoking a cigarette, throwing a pan of oil in the sink, using electricity, etc. Statistically speaking…

Statistically the typical US family had 3.14 people in 2015. But directly observing this would be a gruesome sight for the 3 people looking at the 0.14 one…

If you don’t understand the difference between statistics and directly observed events that is your problem. And this would not be statistically speaking ;).

And chew on this for a while: There are laws that allow pollution to kill tens or hundreds of thousands of people every year but VW knowingly polluted even more. I wonder how many people are car manufacturers legally allowed to kill by knowingly installing faulty parts…
Statistically you lost this argument already. Once you answer this question you will also lose it directly.

Anyway, long story short, my point was that when the justice system also takes into account financial considerations when taking a decision then it’s no longer a justice system but an extension of the businesses. And the US justice system servers justice a lot less then the EU one. While money always “talks” the US justice system tends to serve justice only as a side effect of serving big business. That is why companies like GM, MS, Google and Apple got away with so much for so long in the US.

Bundle of Joy

The DOJ already has max fines allowed for violating EPA acts for the 500k cars sold (18 billion) and there is no limit to the punitive damages that states and individuals can sue for. This was criminal, not negligence.
GM already went bankrupt, and was owned by the US government via stocks, so they were bullet proof (aside from the fact that most of the cases were fraudulent–the air bag issue did not kill, doing 80 and hitting a tree did). No comparison here to VW.
VW is in big trouble and could possibly be destroyed under current law. In the US alone.
That will not happen. They will bribe who needs to be bribed, and move on.
However cheap diesel cars are gone forever now.
If you want one, you will buy a beemer or benz, and use adblue.

Mel Gross

Absolutely! The problem of levying a $10 million fine for a problem that gave them $500 million in profit, and $15 billion in sales is crazy. When that happens, as it most often does, the company considers it to just be part of the cost of doing business.

The fine needs to be triple the profit. Even that may not be enough as the sales numbers gives them a lot of cash flow. So that cash flow should also be taken away.

These companies need to know that doing something that affects the health, safety and life of their users (and others) is going to cripple the company. The officers should be held liable if it can be shown that whatever was done was deliberate, and particularly if it was concealed. Nothing less will have a long lasting effect. The officers of a company should be thinking that the danger of doing something dangerous is extremely risky for the company, and for them personally.

Mel Gross

VW isn’t going to be killed by any solution here. Their biggest problems will come from Europe, where over 11 million of these cars were sold.

Estimates that over 11 people died in this country from the pollution from these cars is dwarfed by the estimates of hundreds of deaths to a thousand in Europe. While what happened at GM was bad, this is far worse. Think of what the deaths here would have been if we liked diesel cars! We could have had a thousand deaths due to this as well.

GM had to do a recall to replace the switches, and it wasn’t close to 30 million cars either. The switch problem only exhibited itself if you had a car key with a lot of other keys or junk on the keychain that pulled the switch down from the weight. Most cars weren’t affected because of that.

But VW’s problem affects every car.

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Of course they won’t. The EU wants them too keep going just like the US wanted GM to keep going because running them into the ground would hit each respective economy hard.
And that’s the point: it’s never about justice or supporting the normal people. Just politics, interests and money. And the execs rarely get the blame, they resign and take their bonuses with them.

The problem doesn’t affect “every car” by a long shot. It affects some diesel engines. VW sells ~10 million cars per year. That’s 70 million cars since 2009 and 11 million affected.

And I find it disconcerting that you consider the risk of driving a car that may kill you at any point as acceptable just because your keychain is light. What happens if you snag it while driving?
VW cars are also affected only if the engine is on.

P.S. I’m really curious to know how do you estimate “over 11 people” died from this particular issue. You add up the emission numbers, assume they will kill X people per gram and do the math? The math says we all participate in this. You are knowingly using vehicles (and not only) that pollute and kill people. And plenty of people still legally drive cars meeting older emission standards. Aren’t they killers too?
10 years from now emission standards will be even stricter so by those rules you are already a killer. I know you’re not breaking the law today but morally speaking you don’t have a leg to stand on.

VW is not guilty of killing more than anyone else but they are guilty of circumventing the rules and breaking other laws with premeditation and for profit, for lying and cheating.

Mel Gross

i never said that it was ok. Please don’t put your thoughts out as mine. What I said was that it’s agreed by the EU’s own agency that does pollution and medical analysis, that the WV problem will have added at least 1,000 deaths per year to Europe from this. And yes, they can determine this. It’s well established science. And as for here, it’s been determined that around 120 deaths can be attributed to it.

And unless these are either fixed, or removed from use, it’s a gift that will continue to keep giving.

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If you can’t tell the difference between knowingly setting a death-trap and waiting for someone to fall into it and knowingly doing more of what you were already allowed to do that statistically leads to more deaths, then statistically speaking you might not be qualified to carry out this conversation. But here we are ;).

“Well known science” is actually statistics and this is considerably different from direct action, although you seem to think they are the same. So saying it *can* kill an additional 1000 people per year is not the same as saying it *killed* 1000 people. Also you might drive a car or take the bus. You are likely responsible for at least 1 death over your lifetime. Just because today someone considers that 1 death to be statistically acceptable doesn’t actually make it acceptable, does it? You are still responsible for 1 death and should be punished just as if you pulled the trigger. Right?

And just so I drive the point home, the 124 deaths GM was responsible for aren’t statistics or estimations. They were directly tied to a intentional decision to use a part that was known to cause this issue, then hiding this.

Legally speaking VW is on the hook for pollution and lying/cheating. And morally… You’re trying to tell me it’s OK to legally kill millions of people every year with pollution but the extra thousand is what make it bad. So legally it’s all going to be solved with a “deal” just like every other shitty situation like this but morally you don’t have a leg to stand on when defending one killer as opposed to another.

If we were punished for statistics the same as for actual direct actions I don’t think we’d be having this conversation over the internet. We’d have it live. Sharing a cell.

Tony_IA

In my opinion, the only “good” solution would be for VW to just give a direct trade for a new vehicle “similar” to what was purchased. And by similar I mean this years model of vehicle X with the same options only gas instead of diesel. No money needs exchange hands, VW can give away existing cars already in the US, and people get a new car to replace the one they have been driving. This will cost VW, but set a good precedent for future auto shenanigans. Especially if the diesel cars have to be removed from the roads and destroyed because they are beyond fixing. Realistically, this is VW’s only option beyond giving back full purchased price value so people have the choice of where to spend their money. I don’t think people deserve pain and suffering cash, as much as they think they might deserve it.

ja_1410

The sad thing is that there are hundred of thousand of good people working for VW and its suppliers that will get hurt by this lack of action and criminal behavior of the leadership of the company.

Mark

Not to mention the customers and the continuing environmental harm,

Orion4tech

That is way exaggerated.
Cars account for what? 3% of the total pollution in the US and Diesel Cars are a huge minority in the US.

Joel Hruska

The consumer vehicle fleet accounts for 27% of all GHG emissions. Diesels that emit 10-40x more NOx than they are meant to emit have a disproportionate impact on that number.

Think about it like this: There are 600,000 affected VW diesels in the US. If they each emit 10x more NOx, that’s 6 million vehicle-equivalents. If they emit 40x (the highest number I’ve seen), that’s the equivalent of 24 million cars.

Both of those figures are much more significant than the initial 600K would suggest.

Orion4tech

No it’s more like 3%, I’m taking just about cars.

In Europe is like 15%.
VW sold 600 000 diesel cars in more than 5 years while millions of cars are sold in the US yearly. The impact of those cars sold by VW is closer to 0 in comparison to the market in general.

Mark

So Volkswagen wants their investors to think that they honestly believed they could negotiate a behind-the-scenes settlement with CARB and the EPA. This sounds like the lawyers talking, but I doubt that this argument will fly in any court. To take it on face value, one would have to believe either that the VW organization is very naïve or that their arrogance is an order of magnitude greater than has already been acknowledged.

Consider:
After the initial discovery of unreasonably high on-the-road emissions, Volkswagen challenged the data/test methodology and denied the existence of a defeat device. They then continued the denials for a year as the EPA and CARB performed numerous confirming tests, all the while challenging the methodology and/or instrument calibrations in each instance. It became increasing evident to CARB technicians that they were being stonewalled. Once CARB had rigorously validated their tests, with VW still in denial mode, CARB and the EPA forced VW’s hand by refusing to certify their 2016 diesels for sale.

There was not a chance that any behind-the-scenes agreement could have been reached. The well was poisoned by VW’s behavior in the preceding year.

Marty Tilert

I love seeing the U.S. Federal Government being the good guys here for once and protecting the consumer & environment from corporate greed. VW seems to think it’s entitled to special treatment here like they got in Europe and it looks like they’re actually in for waaaaaaaay more financial hurting if they don’t cooperate.

Juan Nightstand

I’ve owned my 2013 TDI Jetta for three years now, and I would be happy with a buyback of 70%, that’s 10% depreciation per year.

fastball

I want VW to buy back my 2011 TDI at the value the car had at the time of the discovery. As of that moment, my car lost all value in any trade-in or resale. And frankly, I wouldn’t be able to drive it in California or a few other places based on its emissions. I’m basically carrying a boat anchor around.
I want fair market value…and if VW wants my business back again, a VERY healthy discount off a new model for my inconvenience. Otherwise, I’m going elsewhere.

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